OMGT2085_Topic01_Overview of Logistics & Supply Chain Management

OMGT2085 Introduction to Logistics & SCM

Topic 1Overview of Logistics & Supply Chain Management

VpLyonII_0182 (2008), Available: flickr, http://www.flickr.com/photos/titlap/2779796068/ [accessed 1 October 2012]. Photo by Julien Haler.

http://www.flickr.com/photos/titlap/2779796068/

http://www.flickr.com/photos/titlap/2779796068/

Topic Areas

• Supply Chain

• Supply Chain Management

• Logistics

• Logistics Adds Value

• Logistics Activities

• Integrated Logistics

• Logistics Systems

2Intro to Logistics & Supply Chain Management


Supply Chain

• Series (chain) of firms in a coordinated / integrated system (pipeline)

firms activities resources

• Move product, material or service

from supplier (inbound)

to customer (outbound)

• Parts of the chain

vendors/suppliers manufacturers

wholesalers service providers

sales channels (retailers) consumers


Supply Chain

• Definition

an extended enterprise that crosses the boundaries of individual firms to span the related activities of all the companies involved in the total supply chain

this extended enterprise should attempt to execute or implement a coordinated, two-way flow of goods/services, information, and financials

integration across the boundaries of several organizations in essence means that the supply chain needs to function similar to one organization in satisfying the ultimate consumer


Supply Chain


Supply Chain Management

• Definition coordination / integration of 3 key flows (products / materials or

services, information and financials) within and between firms in the supply chain to fulfil the final customer’s demands through the most efficient use of resources

• SCM in a nutshell – Youtube link: http://www.youtube.com/watch?v=Mi1QBxVjZAw

Source: Center for Supply Chain Research, Penn State University (2008).


http://www.youtube.com/watch?v=Mi1QBxVjZAw


• Primary objective

fulfil customer demands through most efficient use of resources

• Success factors (resources)

inventory (stock)

cost

information

customer service

collaboration relationships


• Effectiveness

value chain concept : An approach to evaluating the overall performance of the organization in terms of value contribution to profit margin of the various primary and supporting areas in an organization.

• Efficiency

total cost concept: An approach to managing systems where potential changes are evaluated on the impact of the change on total cost of the system.

Intro to Logistics & Supply Chain Management 9


• What customer-driven value strategically drives the supply chain of your product?

–Lean –Flexible –Agile –Responsive–Innovative –Reliable–Risk-averse –Green practices–Safety-conscious–Customized output–Accessibility to different types of customers –Other values important to customers in the supply chain –A hybrid of many different values



Source: http://omiusajpic.org/issues/investing/supply-chain/

What other values could be important to a supply chain?

http://omiusajpic.org/issues/investing/supply-chain/

11

Supply Supply base rationalization, supplier alliances, SRM, global sourcing, ethics and sustainability

Operations Demand management, CPFR, MRP, ERP, inventory visibility, lean systems, Six Sigma quality systems

LogisticsLogistics management, customer relationship management, network design, RFID, global supply chains, sustainability, service response logistics

IntegrationRisk and security management, performance measurement, green supply chains

Source: Wisner et al., 2012

ALL ELEMENTS DRIVEN BY DEMAND

Intro to Logistics & Supply Chain Management

Foundations of Supply Chain Management


12

• Supply Foundation

Supplier management - improve performance throughSupplier evaluation (determining supplier capabilities)Supplier certification (third party or internal certification to

assure product quality and service requirements)

Strategic partnerships - successful and trusting relationships with top-performing suppliers

Ethics and sustainability – recognizing suppliers’ impact on reputation and carbon footprint




13

• Operations Foundation –Demand management - match demand to available capacity –Linking buyers & suppliers via MRP and ERP systems–Use lean systems to improve the flow of materials to reduce

inventory levels–Employ Six Sigma to improve quality compliance among suppliers





• Logistics Foundation

Transportation management - tradeoff decisions between cost & timing of delivery / customer service via trucks, rail, water & air

Customer relationship management - strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements

Network design - creating distribution networks based on tradeoff decisions between cost & sophistication of distribution system




• Integration Foundation Supply Chain Process Integration - when supply chain participants

work for common goals Requires intra-firm functional integration. Based on efforts to

change attitudes & adversarial relationships

Supply Chain Performance Measurement - Crucial for firms to know if procedures are working




Major Supply Chain Issues

• responsiveness of supply chain networks to the market

• increase complexity of organizations

• inventory deployments

• collection and storage of large amounts of data

• achieving total cost and value

• organizational relationships

• performance measurement

• evaluation and successful implementation of technology

• transportation management

• supply chain security



Logistics


Logistics

• Primary objective

how to get resources in the right quantity, at the right location, and at the right time?

• Definition part of the supply chain process that plans, implements and

controls the efficient and effective flow and storage of resources from the point of origin to the point of consumption in order to meet the final customer’s demands


Logistics

• Increased recognition

news, promotions and advertisements

• Increased sensitivity

product quality

service quality

• Types of logistics

business

military

event

services


Logistics Adds Value


Source: Center for Supply Chain Research, Penn State University (2008).

Logistics Adds Value

• The five principal types of economic utility which add value to a product or service are:

form (what)

time (when)

place (where)

quantity (how much)

possession (why)


Logistics Activities

• Transportation• Warehousing and storage• Industrial packaging• Materials handling• Inventory control• Order fulfillment• Demand forecasting• Production planning/scheduling• Procurement• Customer service• Facility location• Return goods handling• Parts and service support• Salvage and scrap disposal


Reverse Logistics


• Definition:

A comprehensive, system-wide view of the entire supply chain as a single process, from raw materials supply through finished goods distribution. All functions that make up the supply chain are managed as a single entity, rather than managing individual functions separately.


Vitasek K 2010, Supply Chain Management Terms and Glossary, Council of Supply Chain Professionals, Illinois, United States, viewed 18 June 2010, <http://cscmp.org/digital/glossary/glossary.asp >.

Integrated Logistics

http://www.geodiswilson.com/en/Global_tools/Logistics_Dictionary/T/

Role of information • information is the lifeline of business and supply chains, driving

effective planning, decisions, and actions–management of logistics operations–7Rs/8Rs (including the right format)–forecasting –performance management

• present-day information technologies allows for timely, relevant, accurate, cost efficient sharing of information between suppliers, manufacturers, customers, partners, and logistics service providers



Role of information



Wiebe C 2004, ‘Evolving toward Supply Chain Excellence’, Teradata, viewed on 6 October 2012, < http://www.teradata.com/resources/white-papers/Evolving-toward-Supply-Chain-Excellence-eb3199/>.

http://www.teradata.com/resources/white-papers/Evolving-toward-Supply-Chain-Excellence-eb3199/




Physical SupplyMaterials ManagementInbound Logistics

Physical DistributionOutbound Logistics


Comparing two systems – which option should we choose?

Logistics Systems


Logistics Systems

Figure 2-12

Logistics and Spatial Relations

Which of the two options is less costly, A or B?


Logistics Systems

• Materials Management v. Physical Distribution

frequently the movement and storage of raw materials is far different from the movement and storage of finished goods

4 different types of logistics systemsbalanced system - e.g., consumer products heavy inbound - e.g., aircraft, constructionheavy outbound - e.g., chemicalsreverse systems - e.g., returnable products


Logistics Systems

• Cost Centers

by examining logistics activities as cost centers, trade-offs between them can be analyzed to determine the lowest total cost or highest service logistics systems

trading off one logistics cost center against another (ex. spending more on transportation against spending more on warehousing)

Change to higher Cost Mode of Transport

$13.00$15.00Total Cost

1.002.00Cost of Lost Sales

0.751.50Warehousing

3.204.50Packaging

3.755.00Inventory

$4.20$3.00Transportation

MotorRailCost Centers

Change to higher Cost Mode of Transport

$13.00$15.00Total Cost

1.002.00Cost of Lost Sales

0.751.50Warehousing

3.204.50Packaging

3.755.00Inventory

$4.20$3.00Transportation

MotorRailCost Centers

Change to more Warehouses

$3,600,000$3,300,000Total Cost

100,000350,000Cost of Lost Sales

1,000,000600,000Warehousing

2,000,0001,500,000Inventory

$500,000$850,000Transportation

5 warehouses3 warehousesCost Centers

Change to more Warehouses

$3,600,000$3,300,000Total Cost

100,000350,000Cost of Lost Sales

1,000,000600,000Warehousing

2,000,0001,500,000Inventory

$500,000$850,000Transportation

5 warehouses3 warehousesCost Centers


Logistics Systems

• Nodes v. Links

nodes are spatial points (warehouses, plants)

links are the transportation network (rail, motor, air, pipe, water)


Logistics Systems

• Logistics Channel

the network of intermediaries involved in the logistics system


Logistics Systems

• Cost Perspective

the most efficient systems are not always comprised of each system component operating at its lowest possible cost

the critical concern is to have the entire system operating at its lowest total cost while aiming simultaneously to create value for customers and the supply chain


Logistics Systems

Levels of Optimality


Logistics Systems

• Level of Optimality

External operational constraints may result in sub-optimal outcomes

Internally, logistics systems must work in harmony with marketing, finance, production, and other business units, which may also result in sub-optimal logistics performance


Summary

• What did you learn in this topic? Summarize.

• Challenge Questions for Topic 1: (1) (2)


Documents

OMGT2085_Topic01_Overview of Logistics & Supply Chain Management